Published on November 26th, 2018 | by The GC Team0
FCA proposes introduction of price cap on rent-to-own firms
The Financial Conduct Authority has proposed the introduction of a price cap on the rent-to-own retail sector, which often charges more than other retailers for essential household goods such as washing machines and cookers.
The cap, subject to consultation, will come into force on 1 April 2019. The changes are expected to save consumers up to £22.7m per year.
The FCA said RTO customers are some of the most financially vulnerable in our society. Only a third are in work and most are on low incomes of between £12,000 and £18,000.
In some instances RTO customers can pay up to four times the average retail price when add-on insurance and warranties are taken into account.
The proposed price cap will limit both the cost of the product and the charge for credit. Credit charges cannot be more than the cost of the product, and RTO firms will need to benchmark the cost of products against the prices charged by three other retailers.
Andrew Bailey, Chief Executive of the Financial Conduct Authority, said: “We believe a cap is the only intervention that will effectively tackle the highest prices.
“We want to stop consumers having to pay many multiples more than the price of a product on the high street. These changes build on the measures we have already taken across the high-cost credit sector.”
The FCA’s previous work has resulted in redress packages for around 340,000 consumers of RTO firms BrightHouse, PerfectHome and Buy As You View of nearly £16m.
The organisation said it is also introducing a 2-day cooling off period for the sale of extended warranties, effectively banning firms from selling these warranties at the point of purchase. This will come into force on 22 February 2019.